Freight cap welcomed

Government’s decision to put a cap on the freight cost on which duties are calculated is being described as a good initiative by one University of the West Indies (UWI), Cave Hill Campus Lecturer.

However, Gavin Bovell, Coordinator of the Logistics and Supply Chain Management Masters programme at the university, questioned if capping the freight cost at US$7,350 for 20-foot containers and US$8,000 for 40-foot containers went far enough to benefit all importers.

This budgetary measure, which is intended to bring partial relief to Barbadian consumers, will run for one year in the first instance, from March 15, 2022 until March 31, 2023.

Bovell explained that there were some businesses that were importing items from the Caribbean Community (CARICOM) and would not necessarily be paying the rate at which the freight cost has been capped.

“In some cases it may be below the cap. So that cap actually hurt those persons rather than help them. The capping of the freight would be helpful for industries that have seen that significant increase and I can tell you that a lot of the industries have had to remain quiet and serve the customer at these high costs and it is not easy. I take my hat off to the companies that have survived and had to absorb these freight costs,” said Bovell.

During the height of the pandemic in 2021, some regional companies that were shipping items from China and some parts of Europe complained that freight costs had increased drastically, in some cases as high as 500 per cent, from around US$2,500 or US$5,000 per 20-foot container to as much as US$15,000 or US$20,000 for the same container.

Bovell told Barbados TODAY the decision by the Mia Mottley led administration to cap the cost of freight used for the purpose of calculating customs duties was “a good initiative”.

“While they can’t change the price of the freight cost, what it is seeking to do is to buffer the duty that the companies pay,” said Bovell.

Companies will still be required to pay the cost of the freight to the shipping companies for getting items to Barbados. It is the amount of duties that they pay to Government based on that freight cost that would be affected.

For example, if company X pays US$14,000 per 20-foot container for freight, the amount paid to government would be calculated based on the cost of the goods, and duties based on the US$14,000 for the cost of the freight.

With the cap, if company X pays the same US$14, 000 per 20-foot container for freight to the shipping company, the cost that company will pay to government would be calculated based on the cost of the goods and duties based on a cap of US$7,350 for freight.

However, Chairman of the Barbados Chamber of Commerce and Industry Anthony Branker raised concern regarding those companies already paying duties on freight that cost less than the caps announced.

“I am understanding that if you are bringing in a 20-foot container it will be one fee regardless and if you are bringing in a 40-foot container it is that US$8,000. That makes no sense, but we will listen to the response from the finance minister and see how that works,” Branker said at a post budget breakfast seminar.

“I am saying that if that is the intention there is going to be no savings because there is a tremendous amount of goods that are of CARICOM origin that we pay less than US$3,000 on a container. Why would I now all of a sudden be paying US$7,000 and US$8,000 for that container because that is the cap?” said Branker.

Bovell told Barbados TODAY he understood the concern, saying “does it have a nuanced view of the industry or are you saying that is the blanket?”

The logistics and supply chain lecturer questioned if Government was prepared to give further concessions to businesses, noting that the cost of fuel to industries, especially the manufacturing industry, is one of the major costs, other than the freight.

“So while I think the cap is a good initiative, you have to think about companies that have seen increases in freight, but their cost of freight would have traditionally been lower, and I am talking about regional shipments. Are they going to see any special attention paid to them or essentially are they going to see an increase in their duties because they fall below the cap?” said Bovell.

He proposed that the UWI could help government to carry out research if that was needed

“We have the resources and we are more than willing to provide our support in helping to shape the conversation and informing the public,” he added. marlonmadden@barbadostoday.bb